A typical business cycle is probably one of the more understood principles of economics. Unfortunatly, it is also probably one of the least applied principals among small business owners. By understanding the normal ebb and flow of business, you can find extra motivation to carry on and find success where others fail.
Since we know how these cycles run, it should be a simple matter to predict them and ride through them. But so often it turns out that people new to online business will quit at the first sign of adversity.
This signals the end of the company.
But there is even a much more sinister result. If a person does not learn how to get past obstacles then success will never be thiers. That goes for online or offline. And it applies to life outside of business as well as within it.
The cycle starts out innocently enough. Actually it's usually exciting and fun at first when a new business gets started. There is generally a lot to learn. Excitement and anticipation of results run high. It's easy to dream about where the new venture will lead and picture the fruits of clever labor.
Everything at this point is all profit projection, fame and fortune. This lays the seeds for future failure, as inevitable obstacles will surely arise. On the surface these don't seem fatal. The fading away of the initial excitement usually begins the downward spiral.
At some point after beginning the project a person will settle down into the day to day routine. This is really the danger zone of losing interest which leads to quitting the business. That, of course, leads to business failure.
This is when the daily tasks of web site promotion, support calls, testing, tracking and tweaking can get monotonous. If this is a new venture, then the business is likely not making a profit yet and that also becomes a weight on enthusiasm.
Knowing this ahead of time will help your success grow like wildfire! Realize that you will likely lose money in the first few weeks and months. That's just part of the cycle. It's called investement. Depending on the business, you will be investing money, time or both money and time. These are all precious and that's why it's so hard to keep pushing forward when you don't see immediate results.
Even though this is one of the hardest parts of making it in your business, it will be one of the most rewarding moments. It's rewarding when you can look back from the top of your success and look with pride upon the tough times.
You knew you had to go through the valley before reaching the top of the mountain.
And this is the reward for the hard work and persistence. By having gone through the hard times and seeing how the cycle works first hand, you have the knowledge ingrained on how to repeat that success as many times as you choose.
Have you ever wondered what separates the super successful from everyone else?
It is this: the top achievers in business have persevered when others gave up. They've learned what it takes to succeed by experiencing it. By getting though to the other side they have new confidence that what they're doing works.
Next time it's just a matter of refining the process and trying to improve results.
So as you start your business project, keep in mind this cycle. This applies to network marketing, internet marketing, offline business and online business. Riches are not to be had overnight, but they will come with persistence.
One last interesting tidbit: you know about "overnight successes", right? Well, how much work went in ahead of time before that overnight appeared? There were likely months of behind the scenes work to make success happen in a short period of time.
Closely related to working capital is the business cycle. In general, the business cycle is the same for all businesses. For you, however, the timing and issues are different depending on what industry you are in. I want you to learn about the business cycle because it is the rhythm of your business cycle that undermines all of your decisions.
The business cycle keeps time for your company. The pace of your business cycle will determine how much working capital you have. Like a carefully engineered machine or a finely synchronized orchestra, your business cycle is influenced by everything you and all your employees do.
The business cycle is a closed system that really begins when you purchase raw materials or something to resell. If you are in the service industry, then you are buying labor or maybe expertise.
Let's look at the business cycle of Claire's Chocolates. On Friday, Claire places an order for 200 pounds of dark chocolate at $3.35 per pound. The delivery comes in Monday morning and Claire is ready to make her weekly supply of fresh hand-made chocolates. All week, she single handedly makes and sells the chocolates in her shop. By Friday evening when she locks the doors she has sold every pound of chocolate. In fact, she can not even open the store on Saturday because she is out of chocolates.
Claire checks the register and discovers she has earned $1,398 because she sold all 200 pounds of chocolate at $6.99 per pound. Wow! She takes the money to the bank. Let's take Claire's weekly activity and apply a business cycle perspective.
On Friday, Claire placed a chocolate order incurring $670 in current liabilities because she put the 200 pound chocolate order on her supplier charge account. Come Monday she converted the $670 worth of raw dark chocolate to hand-made chocolates. She then sold the hand-made chocolates, further converting the $670 from raw chocolate to shelf inventory to cash.
By Friday, what started out as a purchase order to the supplier was turned into cash for Claire's bank account. How? All by the business cycle. It is remarkable how it all happens so quickly. But you can also see where the pitfalls lie.
Does Claire get to keep all of the cash she made? Of course not. Claire still has to pay off the $670 she owes her chocolate supplier. And Claire has other expenses too - electricity, plastic wrap, boxes, refrigeration. Still, if we were to pause the business cycle of Claire's Chocolates on Wednesday we could calculate her working capital.
To keep this illustration simple, let's pretend the only thing in Claire's business cycle is the 200 pounds of dark chocolate. Realistically, she is making and selling all varieties of chocolates.
So on Monday, if we calculate the working capital, we get current assets of $670 for raw chocolate inventory. But Claire also has a current liability of $670 for the same raw chocolate. By Monday afternoon, however, Claire has moved the raw chocolate into a shelf ready hand-made chocolate inventory. Due to the added value, her inventory is now worth $866.
Claire now has $866 minus $670, equaling $196 in working capital. By Friday, when Claire has converted all of her chocolates into cash she will have $1,398 minus $670, equaling $728 in working capital. Then Claire gets to decide how to use the working capital.
The key to managing your business cycle is velocity - keep things moving. Like Claire, you can convert your inventory to cash rapidly by operating efficiently. When your inventory sits around, your business cycle is stalled.
A common business cycle problem for many small business owners is the final step where you book your sales. Small companies spend so much time on operations and customer service that they never get around to doing the billing.
If you do not get to your invoicing then your business cycle is stalled. Jump start your cycle and keep things moving so you can bring in cash to fuel your growth to make more cash.
Both Roger Hutchison & John Nowly are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Roger Hutchison has sinced written about articles on various topics from Room Furniture, Health and Games. TheCompleteMarketer.com blog makes network marketing on the internet fun! Roger Hutchison runs the site and encourages discussion and questions. Post your